Lessons from the process of government formation after the 2010 general election - Political and Constitutional Reform Committee Contents

Written evidence submitted by Rt Hon Alistair
Darling MP

I refer to my e-mail of 22 December in reply
to Graham Allen's letter of 1 December.[1]
I understand the Committee has not yet concluded its inquiry and
I can therefore add the following in relation to the meeting of
the European Council of Finance Ministers which was held in Brussels
on 9 May last year.

Firstly, it's important to recall the circumstances
of that meeting. Once again there was real concern that if the
European Council of Finance Ministers didn't reach a decision
in relation to support for the weaker economies in the Eurozone
area, then the markets would have had a real go at both Portugal
and Spain as well as Greece. The meeting was urgent and decisions
had to be reached by the time markets opened on the Monday morning.

This meeting was arranged at very short notice.
I took the view that the United Kingdom had to be represented
notwithstanding the fact that the General Election had been held
on the previous Thursday and that whilst the outcome was inconclusive,
it was more likely than not that a new Government would be in
place within a few days.

At all times I sought my officials' advice and
I was advised that the Cabinet Secretary had expressed the view
that the Government remains in place until such time as a new
Government is formed. .

That said, I was conscious of the fact that
I was going to attend the meeting in Brussels at a time when it
was very possible that a different government would be in place
within a few days. I therefore made a point of talking to both
George Osborne on behalf of the Conservatives and to Vince Cable
on behalf of the Liberal Democrats prior to the meeting taking
place.

Both George Osborne and Vince Cable made the
point that I remained the Chancellor of the Exchequer. Both were
happy to be informed as to what was likely to happen at the meeting
but that their view was that I was still the Chancellor they were
not offering an opinion as to what I should do.

Briefly, I explained to both George Osborne
and Vince Cable (in separate telephone conversations) that there
was a real concern about the position with regard to Portugal
and Spain as well as Greece. I said that there had been two recent
G7 calls which demonstrated that this was an international concern
and that the United States was particularly exercised.

Indeed, the matter had been discussed at an
IMF meeting in Washington during the General Election campaign
which I had attended representing the United Kingdom. I further
explained that the real problem was there was no consensus or
clarity across Europe or the.

Eurozone as to what should happen. I went on
to explain that the Commission was still meeting as was the European
Central Bank. Action from the latter on liquidity and support
and other efforts were likely to prove insufficient and that whilst
the IMF would make facilities available, it was necessary for
further support measures to be agreed and announced before the
markets opened.

There were two proposals. One was £60bn
worth of support to Euro area countries building on existing facility
available to non Euro area members but which would not currently
require IMF involvement. I said that my view was the IMF had to
be involved.

The second proposal was a larger European stabilisation
fund with an unspecified amount which would apply to the Euro
area only.

I explained that I had made it clear in a telephone
conversation with Commissioner Rehn (responsible for this area)
that the UK could not be part of this and that there could be
no question of a residual liability.

This is very important. Throughout the meeting
repeated attempts were made by the Commission and others to get
the United Kingdom to contribute to this fund. Had we not been
there we could well have been forced to contribute either directly
or indirectly.

A question did arise as to whether or not it
was open to the United Kingdom to abstain due to election purdah.
However, the proceedings were subject to QMV and as I said in
the House of Commons in the debate on the Loans to Ireland Bill
on 15 December, for us to have abstained would have meant we would
have been outvoted anyway but we would have lost our influence
in the other matters which would be regarded as important such
as the possible contribution to the European Stabilisation Fund.

I have replied at some length as I think it
is important that the Committee should understand that both the
issues at stake and the reason that I took the decisions that
I did. We were not committed to the European Stabilisation Fund
but we did agree to the £60bn worth of support to the Euro
area countries building on the existing facility which had been
available to non Euro area countries.

Finally, for the sake of completeness, the package
that we agreed in relation to Greece on that day did not involve
contribution from the United Kingdom.

Whilst there is no formal obligation to consult,
I believe that it is a matter of courtesy that it was right to
ensure that the then Opposition was fully informed.

If the Committee would like any further information
then I would be happy to provide it.